Making Structural Changes & Changing the Mode of Operation

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Making structural changes means changing the deal structure of a securities offering.

Reworking your securities’ features and benefits will be relatively easy once you have entered the financial assumptions into the CapPro™. You can easily run different “what if” scenarios. Maybe a participating preferred stock offering that has a dividend of 14% with 20% participation for a total annual return potential of 34%, with a ten-year call at 130% of par value, as opposed to the 110% in the previous example, is more appealing for the investors. That is the beauty of running the numbers in the first place — you will know what you can afford to give up and how to structure the deal so that it sells to your private market or into the public markets.

            Maybe your company’s mode of operation is the real problem. It could be time to rethink your company’s entire mode of operation, which inherently determines its capitalization needs. Let us say the current mode of operation requires $2,000,000 in total capitalization to get off the ground; that amount may simply be too much money in the eyes of your potential investors. Far too many times our clients have grandiose, unrealistic plans that require millions and millions of dollars. After testing their private (prospective investors: family, friends and professional contacts) market, they soon discover that rethinking their mode of operation for a reduced initial capital requirement greatly increased their probability of being funded. Most often, they actually do receive the funding after this conclusion has been reached because they have adapted and reduced their capitalization plan to meet the demand of their private capital market.

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